More on Ritchie\’s report

I will give him this: he\’s raised an interesting point:

My research shows that this may be the wrong question. The most important question is not the incidence of the tax on these transactions, but the incidence of the cost of these transactions. If, as the opponents of the tax argue, the tax charge will fall on ordinary people then it follows that the excessive charges made by banks to fuel their own profits and to pay the wholly unreasonable rewards of bankers also fall on ordinary people. That is something of an own-goal on their part. It is also somewhat simplistic.

He\’s right of course: profits do come from somewhere.

However, he\’s made the assumption that bank profits come from transactions which are either zero sum or even negative sum. Thus the fact that bankers get paid well and make profits must mean that consumers have lost something in the transaction.

Entirely ignoring the possibility that even though the bankers are well paid and that banks make profits, consumers are better off in total because the transactions themselves are positive sum.

And we do tend to think that voluntary transactions are positive sum: that\’s why people undertake them after all.

So, while it\’s a nice try I\’m afraid it\’s a fail. I would point this out to him but unfortuantely I cannot:

Note: This post is open for comments. Comments will only be accepted if they contribute positively to debate on this issue. Those that do not will be deleted.

2 comments on “More on Ritchie\’s report

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.